The Last Great Buying Opportunity

By: Toby Connor | Tue, Feb 4, 2014
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It's been my opinion now for a the last year that the bull market that started in March of 2009 at 666 on the S&P would come to an end either in late 2013, or early 2014. I'm confident that will be the case, but based on the cyclical pattern of the current decline I believe we still have one last leg up before this bull comes to an end. I think the intermediate decline now in progress is going to create the conditions for a final manic melt up phase over the next 2-3 months to complete this huge parabolic structure that the Fed has constructed with 5 years of QE and 0% interest rates.

We've come this far and tested the 2000 reaction high, I have to think we're probably going to go all the way and test the all-time highs on the NASDAQ before this bull market comes to an end.

NASDAQ Daily Chart

A similar percentage advance would place the S&P 500 at roughly 2200 points which when completed would represent a massive parabolic structure that when it collapses will tip the globe over into the next recession/depression.

S&P500 Daily Chart

So when do we buy stocks you ask? Should we buy today? The answer is, no I don't think the intermediate decline is done just yet. We first need to break the intermediate trend line to confirm this as an intermediate degree correction.

S&P500 Daily Chart 2

At the very least I think the S&P needs to retrace 50% of its recent intermediate rally. That comes in at roughly 1700-1705.

S&P500 Daily Chart 3

On a cyclical basis the current daily cycle is on day 31. The average duration from trough to trough for a daily stock market cycle is 35-40 days. So it's still just a little bit early for this cycle to bottom.

There are two events coming over the next week and a half and I'm pretty sure one of them is going to serve as the trigger for this daily and intermediate cycle to bottom, and the melt up phase of this bull market to begin.

The first is the employment report Friday morning. The second is Janet Yellen's Humphrey Hawkins address next Tuesday. Before or during one of these two events I think stocks will make a final plunge to test that 50% retracement/200 day moving average. That's the point where retail investors will panic and professional traders will be loading up the boat for the final run of this bull market.

The one caveat is, if the stock market were to crash 150-200 points over the next 5-6 days then it would signal the parabolic structure is already in collapse and the top of this bull market occurred earlier this month.

I don't really think this is going to be the case as the current intermediate rally lasted 30 weeks. That's not how a final intermediate degree move should behave.

When we do get a final top I expect it will come around week 10-12 of the then current intermediate cycle. An intermediate cycle that tops on week 30 just doesn't have enough time to complete an initial bear market move. So what I'm looking for once we complete this bottom sometime in the next 4-6 days will be a 2-3 month rally that will top sometime in late March to mid-April. That would give us a final intermediate top somewhere around that 10-12 week period. At that point we should get an 8-10 week crash as the parabolic structure collapses. The initial target would be the 2000/2007 all-time highs followed by a final bear market bottom in early to mid-2016.

S&P500 Weekly Chart

Over the next week and a half I will be watching for certain timing signals to try and determine whether the bottom is going to come on Friday's employment report or on the Humphrey Hawkins address next Tuesday. Either way, we should be on the verge of entering another bubble phase very similar to 1999, with the caveat that we not see a 150-200 point crash over the next 4-6 days.

 


 

Toby Connor

Author: Toby Connor

Toby Connor
Gold Scents

Gold Scents is a financial blog focused on the analysis of the stock market and the secular gold bull market. Subscriptions to the premium service include a daily and weekend market update emailed to subscribers. If you would like to be added to the email list that receives notice of new posts to Gold Scents, or have questions, email Toby.

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Source: The Contrarian Take http://blogs.forbes.com/michaelpollaro/
austrian-money-supply/